World Bank looks to lure wealth funds into Africa
WASHINGTON, April 2 (Reuters) - The World Bank is looking at ways to encourage sovereign wealth funds to invest some of their assets into equities in sub-Saharan Africa, bank President Robert Zoellick said on Wednesday.
If wealth funds invested just 1 percent of their estimated $3 trillion assets in Africa, it would generate about $30 billion for a region in need of reliable energy and roads, he said.
Under the so-called "One Percent Solution," Zoellick said the World Bank, through its private-sector lender, the International Finance Corp, could help connect long-term global liquidity with investment opportunities in Africa.
"Where some see sovereign funds as a source of concern, we see opportunity," Zoellick said in a speech hosted by the Center for Global Development, a think-tank.
"This 1 percent could be the start of something much bigger, across more types of funds and countries, because the investment of wealth into equity for development offers opportunity, not something to fear," he added.
Thus far, sovereign wealth funds have focused their investments in industrial countries, like the United States, where it has raised fears among U.S. lawmakers that the funds could make investments that are politically motivated and target companies considered vital to national security.
At the request of the Group of Seven industrial nations, the International Monetary Fund is developing a best-practice guide to encourage more transparency of the wealth funds and a better understanding of their role and significance.
The wealth funds are often created to invest surplus reserves of governments that are flush with cash, especially exporting superpowers in Asia, like China, and oil-producing nations.
Already, China has a growing presence in Africa and has spent billions of dollars to secure raw materials for its booming economy.
"Yes, the sovereign funds need transparency and should be guided by best practices to avoid politicization. But I believe we should celebrate a possibility that government-sponsored funds will invest equity in development," Zoellick said.
He said equity prospects in Africa were developing and so were opportunities for wealth funds in the region.
"IFC is now working on an open architecture platform for funds, drawing on IFC's access, knowledge, and capital, but also welcoming joint ventures with governments and their funds," he said.
Fewer conflicts, higher economic growth rates, better economic management and untapped resources has increasingly made Africa the next so-called frontier market for investors.
Between 1995 and 2005, 17 sub-Saharan African countries grew on average 5.5 percent without the help of natural resource wealth, while eight resource-rich countries grew at around 7 percent.
Zoellick said the bank could help develop new indexes for African investment and eventually draw in a broader set of investors, including pension funds, into Africa. (Editing by Leslie Adler)
